Tue, Jul 17, 2012 - Page 8 News List

Revamping the cost of healthcare

By Lee Jwo-leun 李卓倫

Another big logical error is revealed by the fact that, after the government made households responsible for paying for some healthcare services that were originally covered by the NHI, it did not lead to any cost savings. All it means is that the costs are borne by different sectors of society. In 2009, private-sector healthcare spending accounted for 42 percent of total medical and health expenditure. Of this, 35 percent was spent by households, 6 percent by non-profit organizations and 1 percent by administrative fees for commercial insurance. In very few industrialized countries does private-sector spending account for more than 30 percent of total healthcare spending. In most such countries, the proportion is less than 20 percent. Only in South Korea is the figure similar to that of Taiwan.

If you have a national health insurance system where people still have to pay more than 40 percent out of their own pockets, then the significance of having social insurance will be diminished and so will public support for the system.

Requiring people to pay out of their own pockets may lead to some savings in the short term, but in the long term the government would be unable to monitor and control the items that people pay for privately. Healthcare providers, on the other hand, can have a real influence on how people judge their own needs. If, in future, commercial insurance companies reinsure privately paid healthcare items, or cover part of the cost, then the private costs will still be a secondary consideration for people when they seek treatment. In the long term, this could cause total medical and health costs to rise even faster. The same logic applies no matter whether the government tries to control healthcare expenditure by increasing part of the load that patients must bear, or by reducing the range of services that the NHI covers.

There are better ways of curbing healthcare expenditure. For example, if the system of payment for clinical services were based on the number of patients seen rather than the amount of service provided, then the financial incentive would encourage doctors to teach people the right ways to handle a cold or influenza, rather than to prescribe lots of different medicines.

Even according to economic logic, one should clearly distinguish between overall and individual considerations and between long-term and short-term effects. In that case, “zombie theories” would still be bothersome, but they would at most only appear occasionally and would not become mainstream ideas or dominate national policy.

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